Refiners have struggled due to high input prices and declining demand
London, United Kingdom (PRWEB) August 29, 2012
Operators in the Petroleum Refining industry faced extremely tough market conditions over the five years through 2012-13. Volatile crude oil prices around a strongly rising trend led to large fluctuations in revenue, while production volumes fell. According to IBISWorld industry analyst Marina Williams-Wynn, “industry revenue is expected to expand at an annualised 7.2% over the five years through 2012-13 to reach £44.9 billion, but over the same period, the volume of industry output fell by an annualised 3.4% and profit plunged”. During this period, some refineries closed, while others changed hands. Revenue is expected to shrink by 4.4% in 2012-13, reflecting the closure of Petroplus's Coryton refinery in May 2012, as well as fairly flat domestic demand for petroleum products. Lower refinery output is expected to result in lower petroleum product exports, while imports are also expected to edge down due to the subdued market conditions. Domestic demand is expected to be about £46.6 billion in 2012-13.
The industry is small, generating about 0.1% of the United Kingdom's GDP in 2012-13. Although there are numerous firms operating in the industry, seven large refineries dominate output, revenue and employment. Their future is less than rosy. Continued excess refining capacity in the United Kingdom and through Western Europe will continue to put downward pressure on margins. At the same time, falling oil production from the United Kingdom's oil fields in the North Sea will mean that refineries increasingly have to look to imported crude oil if they are to continue operating. At least one more major refinery is expected to close over the five years through 2017-18. Williams-Wynn adds, “despite rising oil and petroleum product prices, industry revenue is expected to contract through to 2017-18 as production volumes fall”. Diesel is expected to remain the industry's mainstay as it continues to displace petrol as the transport fuel of choice. There is growth potential within the biofuel blending and production segment in the near term. The Renewable Transport Fuels Obligation requires that by April 2013, biofuel must comprise at least 5% of total road transport fuel supplied by volume. Much of the biofuel sold in the United Kingdom is imported, suggesting that there may be opportunities for an expanded local presence.
The Petroleum Refining industry has a medium level of market share concentration with the top four companies accounting for about 63.5% of the market. Concentration is increasing in 2012-13, with the closure of the Coryton refinery and the effective exit of Petroplus from the industry (due to bankruptcy). The seven refineries operating in 2012-13 produce almost all industry output. The next five years will see further structural changes, with many major players looking to downsize or sell their refineries. Overall, industry concentration is expected to increase. Major companies include ExxonMobil, Essar Energy, ConocoPhillips, Total, Valero Energy, INEOS & Murco Petroleum.
For more information on the Petroleum Refining industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
Petroleum refining is the process of turning crude oil into more usable products such as petrol. The major oil refineries manufacture petrol, diesel, jet fuel, gas oil and petroleum gas. The refining process also leads to the production of by-products such as naphtha, which can be used as a solvent. Companies in this industry also manufacture a wide range of petroleum-based products such as vaseline and petroleum jelly.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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